China’s approach to bad news: concealing it. On Tuesday, China announced further negative economic data, but what caught attention was the omission of figures for youth unemployment from the official report. This decision will only make it more difficult for investors to gauge the current situation in the country. Despite the release of this news, shares in Hong Kong and Shanghai did not experience the same damage as they did on Monday. China’s economy, the second largest in the world, is currently in a prolonged slump. Retail sales and industrial production both fell short of expectations in July. The central bank of China reduced a benchmark lending rate but it was far from the substantial stimulus measures that investors had been hoping for since the country entered deflation last month. This presents a challenge for global growth, as the IMF predicted that China would account for 35% of global growth this year, but that is now seeming unlikely. The slowdown is impacting a wide range of sectors, from commodities to construction. Many large US companies operating in China do not anticipate a rapid turnaround. The reduction in transparency will not benefit international investors. Since the rise of Xi Jinping, China has been publishing less and less economic data. In recent months, Chinese economists have reportedly been instructed to refrain from discussing negative trends. Lawyers working on IPOs have also been instructed to soften their wording on the country’s risks. Steve Tsang, director of the SOAS China Institute, noted that Xi’s focus is more “Sino-centric” rather than how his decisions are perceived internationally. He wants officials to portray China’s story positively and will view withholding negative economic information as a means of boosting confidence domestically, regardless of how investors outside of China interpret it. This shift in approach also highlights Beijing’s priorities, as George Magnus, an associate at Oxford University’s China Center, points out that the focus is on state-led advances in the economy. Private enterprises are welcome to make money, but must follow the party line. President Biden warned last week that China’s economic challenges make it a “ticking time bomb” and expressed concern that it could lead to undesirable actions. Mr. Tsang believes that there are risks regardless of whether China is strong or weak. A strong, wealthy, and powerful China under Xi wants to change the world order. A strongman leading such a state that is becoming weak, poor, and unstable will do whatever it takes to stay in power, regardless of the consequences for the rest of the world.
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